Where will farm incomes go in 2009?

The past 12 months have made up one of the most volatile periods for Midwest farmers in decades. Grain prices, weather and input costs could all, at one time or another, be characterized as extreme.

So, what's this mean for 2009? Many farmers say they expect their income to go down in the next year: Almost half of those responding to a recent Agriculture Online poll say they anticipate income to be "much lower" than 2008.

"My operation has stayed the same but my net income has grown every year for the last 5 years. Not next year," says Agriculture Online Farm Business Talk member guitar Paul. "My current projections show a 50% loss in net income from this year to next year. That puts me back at where I was 5 years ago: Still profitable, but not at a comfortable level."

He adds that his yields have improved, but some of his production costs have tripled or quadrupled in the last year, something that he expects to continue to erode profits next year.

But, some experts see a reversal of that trend. University of Illinois Extension farm management specialist Gary Schnitkey said recently he sees a mixed bag for '09, with some expenses trending higher while others back off the peaks seen in '08.

"We've been seeing wild swings in farm input prices," Schnitkey says, according to Illinois Farm Bureau. "They were higher, but now we see them moderating between now and 2009."

The net result will be a basket of input costs that is lower, on average, than earlier thought. Fertilizer and fuel will likely moderate in price a bit, but production costs in general will continue to touch record levels. For the '09 crops, Schnitkey estimates per-acre non-land costs of around $470 for corn and $296 for soybeans, compared to earlier estimates of $569 and $324, respectively.

Another wildcard for farm incomes in the coming year is land rents. When entering into lease negotiations for the coming year, Purdue University Extension ag economist Craig Dobbins says farmers will likely see slight increases, but not as sharp as those in recent years.

"Will cash rents come down? That's a big question," Dobbins says. "At this point, I'm not so sure that we're going to see much of a decline, but I would expect that the increase we thought was going to occur last summer certainly isn't in the cards, either."

The best bet in an era of high costs like today, farmers say, is to keep a close eye on every item on the balance sheet. That's what Farm Business Talk member Jim Meade / Iowa City says he plans on doing to hopefully boost his farm's income in 2009.

"I'm hoping to improve a little on '08 by marketing smarter, watching inputs like a hawk, and especially doing a better job of growing the grain," he says.

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The past 12 months have made up one of the most volatile periods for Midwest farmers in decades. Grain prices, weather and input costs could all, at one time or another, be characterized as extreme.